[This article originally appeared in the Sydney Morning Herald]
Sydneysiders are now even more restricted in what size they may build their own apartments, given the latest minimum apartment size restrictions, laid down by the NSW Land and Environment Court last month. They will only stifle innovation and increase already ballooning house prices.
The controversial April 9 court decision deemed the current established rule of thumb for apartment sizes too low. Minimum sizes in Sydney are now given by an adjacent table in the Residential Flat Design Code. This code requires new apartments to be up to 35 per cent larger.
The latest rules in Sydney mean one-bedroom apartments must be 58 square metres. Last year in Melbourne 40 per cent of apartments had a floor space under 50 square metres. These regulation changes mean more people will be priced out of the Sydney market who will be forced to live further from the city.
Local governments will now have more power to reject apartment applications too.
The original guidelines were introduced in 2002 and focused on improving design quality. Among other measures, these State Environmental Planning Policy No. 65 (SEPP 65) rules mandated the role of registered architects in multi-residential development, included provisions around minimum amenity standards, and established design review panels.
These planning restrictions set a worrying precedent in this country. Pointing at these rules in Sydney many other jurisdictions are facing pressure from lobby groups. For example, in Victoria last year a leaked document outlined plans for similar restrictions on Melburnians.
Artificially limiting the size of apartments will bring higher prices at a time when most argue we are in an already inflated market. New housing affordability numbers tell a bleak story: even taking into extremely low interest rates, credit agency Moody’s showed the share of household income needed to pay off a typical home loan is at a 10 year high.
Recent research by Dr Mikayla Novak at the Institute of Public Affairs shows that an individual receiving an average wage now needs to spend a full eight years of income to cover the capital city median house price. This is the least affordable housing in some 130 years.
Increasing minimum apartment sizes will only worsen this problem. Basic microeconomics suggests that any reduction in supply – unless arguing for a highly unlikely corresponding fall in demand – will increase prices. Minimum size restrictions mean fewer apartments. Couple this with growing demand as more people want to live in the city, means apartment prices skyrocket.
Innovation will also suffer from these new rules. Minimum sizes provide no incentives to better use small and valuable amounts of space. Without this market pressure, developers are shielded from testing, experimenting and optimising with innovative methods. Around the world architects have been forced to optimise small space design and this has resulted in profound innovation. These innovations much be encouraged.
As Australian cities face population constraints – especially with the geographical make-up of Sydney – developers must be left to innovate and discover new ways to increase population density. The answer to an increasing population is not to restrict the number of houses in the CBD and hope for a greater urban sprawl. It is to allow the market to develop new ways of utilising existing space; free from government prescriptions.
These new restrictions also have a clear nanny-state mentality. By regulating both the minimum size and the composition of private property, local governments are suggesting individuals are incapable of determining their own acceptable living conditions.
The government has no place – even if it be in the rhetoric of sustainability or quality – to encroach on how we may organise and use our own property. If an individual wishes to trade additional space for a convenient location, then they should be free to do so.
In the year to March Sydney house prices rose by 13.9 per cent. Climbing out of this housing affordability mess requires the NSW government to abolish all minimum apartment-size restrictions. These restrictions only drive up prices and prevent individuals from discovering new ways to optimise the space we have.
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